Kasich proposing tax hikes on oil and gas

2-year deal worth $61.7M will mostly help northwest areas of Ohio

June 12, 2013

MARIETTA - Ohio Gov. John Kasich is revisiting the idea of increasing taxes on the oil and gas industry, this time promising an increased cut of the tax revenue to the Appalachian area that generates much of Ohio's oil and gas business.

The new proposal would increase the severance tax on Ohio's growing oil and gas industry to 4.5 percent and promises to send 25 percent of the revenue back to Ohio's Appalachian counties through their development agencies, but local representatives are not sold on the plan.

"I'm not excited about it," said Ohio Rep. Andy Thompson, R-Marietta. "I think it's one of those things when you propose it at the last minute, you don't give it time for proper consideration."

Kasich's proposal was not included in either of the budget bills that passed through the House and Senate last week.

It is possible that the severance tax proposal will be addressed as legislators try to finalize the $61.7 billion, two-year state budget, but Thompson does not see the new proposal getting the support needed to be included.

"I understand local government is interested when you have a proposal like this. But when you read more deeply, it is more like a short-term approach," he said.

While any revenue generated for local government helps, Ohio Sen. Lou Gentile said he thinks any discussion about a severance tax should include more than 25 percent coming back to southeastern Ohio.

"If you look at the Ohio Turnpike proposal, the counties and communities in northwest Ohio are going to receive 90 percent of revenue from toll increases...We deserve at least a majority of that money to return to the communities here in southeast Ohio," said Gentile, D-Steubenville.

The new plan comes more than two months after Kasich shelved a previous proposal that would have raised severance taxes on the booming oil and gas industry to 4 percent and used all of the revenue to lower statewide income-taxes.

Under the new plan, 75 percent of the revenue would still be used for lowering statewide income-taxes.

Those in the oil and gas industry fiercely oppose either plan, which would greatly increase the severance tax rate currently levied against oil and gas drilling companies in Ohio.

"If we didn't like it at four we're not going to like it at four-and-a-half," said Jim Denny, president and chief operation officer for Triad Hunter.

He said he sees the new plan as a political ploy to gain the support of eastern counties that opposed the original plan because it did not return a significant portion of their own tax revenue back to them, said Denny.

"They're hoping a little greed will take the place of good common sense. But there's nothing new to this bill other than there's something in it for me and my constituents this time," he said.

But Kasich spokesman Rob Nichols said the new plan is a direct response to what constituents in Ohio's oil and gas-rich counties want.

"For the better part of a month we're been meeting with groups in the 33 counties in Appalachia. Their concern is this is an asset of theirs that is unfairly being spread statewide. We listened," he said.

Kasich's office has argued that Ohio's oil and gas tax is already one of the lowest in the country.

Currently under Ohio's 40-year-old severance plan, companies pay approximately 20 cents tax per $100 barrel of oil, said Nichols.

The proposed increase would mean Ohio is still imposing smaller taxes than every neighboring state, said Nichols.

However, the low taxes are the reason the oil and gas industry flocked to Ohio in the first place. Changing that changes the entire ball game, said Denny.

"We are generating a lot of revenue for the state, proving cheaper gas, and we're the No. 1 employer as far as growth," he said.

Increasing taxes would weaken if not destroy the reason companies are bringing business to Ohio and could result in job reduction and price increases within the industry, he said.